Slide 1: The Leading Developer of Premium Quality Potash
THE LEADING DEVELOPER OF PREMIUM QUALITY POTASH KARNALYTE RESOURCES INC. 2014 KARNALYTE.COM | KRN: TSX 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Certain statements in this presentation may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation, or industry results, to be materia
Slide 3: Potash Is Critical to Meet Growing Food Demand
POTASH IS CRITICAL TO MEET GROWING FOOD DEMAND • The Food and Agriculture Organization of the United Nations Growing World Population(1) estimates that the global population will reach 9.1 billion by 2050 10 Billion People 8 • There are ~75 million more people that need to be fed 6 each year, with m
Slide 4: Investment Highlights
INVESTMENT HIGHLIGHTS • Bankable feasibility study complete • Environmental approved to commence construction • Strategic investment made by one of India’s largest fertilizer companies (GSFC) • Modular approach: initial 625Ktpa with 2 expansions of 750Ktpa each • Lower upfront ($626m) CAPEX, shorter
Slide 5: Attractive Project Economics: Bankable Feasibility Study
ATTRACTIVE PROJECT ECONOMICS* Bankable Feasibility Study1 (BFS) • Production targeted in 2016 • Initial production of 625Ktpa with ramp-up to 2.125Mtpa in 5 to 6 years BFS Summary (Results below are dependent on price assumption used) • BFS used potash price of $480/tonne based on a medium to long t
Slide 6: Attractive Project Economics: Tax Structure
ATTRACTIVE PROJECT ECONOMICS* Attractive tax structure Primary royalty regime (Potash Profit Tax – “PPT”) • 10 year holiday for new production on base component • 120% CAPEX recovery on initial and expansion capital for profit component allowed prior to profit tax being applied • Company estimated i
Slide 7: Senior Project Debt
SENIOR PROJECT DEBT • Lead arrangers highly reputable financial institutions out of New York BNP Paribas Natixis • Each lead arranger to underwrite 50% of the US$300M facility Underwritten structure • Syndicate to banks, financial institutions and other institutional lenders Subject to credit approv
Slide 8: Strategic Investor with Off-Take Agreement
STRATEGIC INVESTOR WITH OFF-TAKE AGREEMENT • Phase I plant will produce 625,000 tonnes of high-grade potash annually • Gujarat State Fertilizers & Chemicals (GSFC) and Karnalyte entered into a strategic partnership in January 2013 19.98% interest in Karnalyte obtained for $45 million including a tak
Slide 9: Global Marketing Strategy
GLOBAL MARKETING STRATEGY • GSFC off-take agreement • Remaining production into N.A. market Central North American distribution location • Potential for another strategic partner Among highest global pricing environments Port locations Premium product appeals to sophisticated Additional off-take far
Slide 10: The World's Largest Potash-Producing Region
THE WORLD’S LARGEST POTASH-PRODUCING REGION Property comprises a total of ~86,126 acres • Located 0.5 km south of Highway 16 near Wynyard, SK Existing infrastructure • Rail and roadways • Natural gas, power and water in close proximity Access to skilled labour Opportunity for resource expansion 10
Slide 11: Karnalyte's Competitive Advantage
KARNALYTE’S COMPETITIVE ADVANTAGE Lower solution mining OPEX than other Dissolves faster than other salts potassium salts Lower CAPEX, shorter construction timeline Amenable to solution mining than conventional mining Contains magnesium Opportunity for product expansion Carnallite and Sylvinite seam
Slide 12: KRN's High Quality Potash Product
KRN’S HIGH QUALITY POTASH PRODUCT • Minimum Grade 97% • Minimum Grade 95% • Less than 1% sodium • Sodium content 3.5% - 4% key for increasing crop yields • Irregular shape – compactor process • Spherical shape – granulated process • Rough, unsmooth • Superior flowing characteristics • Higher caking
Slide 13: Process Video
=Karnalyte PROCESS VIDEO RESOURCES Saskatchewan j a
Slide 14: KRN's Premium Potash Product
KRN’S PREMIUM POTASH PRODUCT • Fertilizer blends of Nitrogen, Phosphate and Potassium (“NPK”) provide unparalled advantages over standard applications Granulated or compacted product is required for inclusion in NPK blends North America is now entirely blended market, Brazil vast majority and the re
Slide 15: Management Team Experienced in Building Potash Mines
MANAGEMENT TEAM EXPERIENCED IN BUILDING POTASH MINES Stephen Goodman, MBA, President, CEO, Ronald Love, B.Comm., CA, Executive VP, CFO Director • More than 20 years of experience in progressively senior • More than 15 years experience in progressively senior financial roles roles within the investme
Slide 16: Board of Directors
BOARD OF DIRECTORS Bruce Townsend, President, CEO, Director and Stephen Goodman, MBA, President, CEO, Chairman of the Board* Director • Director, Financial Analysis Nitrogen Operations with • More than 15 years experience in progressively senior PCS from 2001 to 2009 roles within the investment bank
Slide 17: Key Milestones and Near-Term Catalysts
KEY MILESTONES AND NEAR-TERM CATALYSTS • Engineering progress has been substantial with Karnalyte entirely prepared for full construction Site prepared and ready for construction Environmental approval in place Proceed to construction permitting Unloading area on rail line secured and prepared to ac
Slide 18: Near-Term, De-Risked Development of High Quality Potash
NEAR-TERM, DE-RISKED DEVELOPMENT OF HIGH QUALITY POTASH • Highest grade agriculture product • Minimal environmental impact • De-risked project • Experienced management team and board: industry-specific expertise • Production expected in 2 years from financing • Attractive After-tax Net Present Value
Slide 19: Appendix
APPENDIX 19
Slide 20: Mineral Resource: Carnallite
MINERAL RESOURCE: CARNALLITE • A potassium salt-bearing mineral • Dissolves faster than Sylvinite, making a solution mining process more efficient • The first mineral that was mined to produce potash (mid 1800’s in Germany) • Contains magnesium Used as a tracer in 3D seismic to map the ore body Oppo
Slide 21: Transportation & Distribution Strategy
TRANSPORTATION & DISTRIBUTION STRATEGY Significant progress made with various Canadian Pacific (CP) main rail line ~3 miles port options: from plant site • Vancouver • Evaluating car supply, movement and rail options • Thunder Bay • Churchill Evaluating Canadian National (CN) ~30 miles • NW United S
Slide 22: Solution Mining Overview
SOLUTION MINING OVERVIEW Surface Facility Brinefield Brine Processing Ground Surface Cavern Patience Lake Member (Predominantly Carnallitite) Cavern Belle Plaine Member (Predominantly Carnallitite) Esterhazy Member (Sylvinite) Cavern Source: Bankable Feasibility Study 22
Slide 23: Brine Processing Overview
BRINE PROCESSING OVERVIEW Brine processing removes impurities from Heat the extracted mineral in order to obtain Water saleable potassium chloride (KCl) • Evaporators remove water from production brine, increasing the concentration of MgCl2 and supersaturating the KCl and NaCl Evaporation & • A cent
Slide 24: BFS Capital Cost Specifics
BFS CAPITAL COST SPECIFICS C$626mm (C$1,002/tonne) US$mm US$ per tonne % of Total 5% Process Equipment and Facility $234 $374 36% 9% Process Equipment and Facility Solution Mining Facilities $118 $189 18% Solution Mining Facilities Other Direct Costs $94 $150 14% 36% Indirect Costs $113 $180 17% Oth
Slide 25: BFS Operating Cost Specifics
BFS OPERATING COST SPECIFICS C$81mm (C$129/tonne) C$mm C$ per tonne % of Total 6% 8% Personnel $7 $11 8% 5% Personnel Natural Gas $27 $43 34% 10% Natural Gas Electricity $10 $16 12% Electricity Brine Field Expansion $21 $33 26% Maintenance & Spare Parts $8 $13 10% 34% Brine Field Expansion Blanket O
Slide 26: Bankable Feasibility Study Economics
BANKABLE FEASIBILITY STUDY ECONOMICS BFS Assumptions Mineralized Average KCl Net KCl Reserves & Resources 2.125Mtpa Operation Tonnage (Mt) Grade (%) Tonnage (Mt) Production Start Up (year) 2015 Total Average Carnallitite 677.6 18.6% 126.0 Mine Production (years) 60 Total Average Sylvinite 110.9 26.1
Slide 27: Magnesium Upside Potential
MAGNESIUM UPSIDE POTENTIAL • Positive Pre-Feasibility Study completed for Magnesium Production Facility in 2012 Magnesium PFS • 147Mt of probable MgCl2 reserves with a mine life 70 years 191Ktpa Operation Reserve can increase when additional plant capacity and Production Start Up (year) na market
Slide 28: For More Information
FOR MORE INFORMATION #14, 11410 – 27TH STREET SE CALGARY, AB T2Z 3R6 TEL 403.995.6560 | FAX 403.523-1033 WWW.KARNALYTE.COM info@karnalyte.com 28